https://www.wsj.com/articles/cut-your-retirement-spending-no…
Interesting that Bengen doesn’t eat his own cooking:
While Mr. Bengen said he would normally invest about 55% of his savings in stocks and 45% in bonds, his concerns about both markets have left him with closer to 20% in stocks and 10% in bonds, with the rest in cash.
Interesting that Bengen doesn’t eat his own cooking:
And his personal portfolio returns have suffered from that.
intercst
20% in stocks and 10% in bonds, with the rest in cash.
With inflation at 8.5% as of end of March, he’s holding 70% in cash?
Nibble, nibble …
DT
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While Mr. Bengen said he would normally invest about 55% of his savings in stocks and 45% in bonds, his concerns about both markets have left him with closer to 20% in stocks and 10% in bonds, with the rest in cash.
Can’t get past the paywall, but this has been a known fact for a while. Here’s a Kitces podcast from 2020 where he discusses how he didn’t really stick to the rule for his clients - different withdrawal rates, different allocations, etc. https://www.kitces.com/blog/bill-bengen-4-percent-rule-safe-… Some of the comments on the podcast are interesting, too.
He pulled his clients out of the market in late 2008, and didn’t start putting them back in until 2010, never really getting them back to their full allocation. In the podcast, he admits that was a mistake. In the past 5 - 10 years, I’ve also seen a lot of articles where he’s advocating for a higher withdrawal rate. I’ve seen him say rates from 4.2%, to 5% should be okay, depending on which article you read and when it was published. I don’t know if it’s:
Who knows for sure? But it’s an observation that should probably be heeded when determining how your portfolio will be managed in retirement.
AJ
I just read that WSJ article on Bengen. (For the first time in about 15 years, I bought a WSJ subscription. WSJ offered me WSJ, Barron’s and MarketWatch as a package for $72/yr. Goes up to $600/yr on renewal. I’ll make sure I cancel before then.)
https://www.wsj.com/articles/cut-your-retirement-spending-no…
Mr. Bengen’s latest revision doesn’t necessarily mean going below 4%, he said. That is because the 4% rule hasn’t really been the 4% rule for some time. His original research was based on a portfolio with 55% in U.S. large-cap stocks and 45% in intermediate-term Treasury bonds.
Since 2006, he has revised that portfolio to add international stocks and midsize, small-cap and microcap U.S. stocks as well as Treasury bills. That raised returns and supported a safe withdrawal rate he increased to 4.7%.
Given the challenges of making forecasts right now, Mr. Bengen suggests cutting spending, if possible. New retirees with highly diversified portfolios that would normally support a 4.7% withdrawal rate might want to start around 4.4%, he said.
So he’s advocating 4.4%, not something less than 4%.
He also mentions that it’s hard to time the market and “I’m uncomfortable holding that much in cash,”
I note that over the past 24 months, the S&P 500 has gained 63%. I’m crying about my 5% in cash and short-term bonds.
intercst
“Interesting that Bengen doesn’t eat his own cooking:”
But remember that retirement spending is at least partially in your control - in the hands of
the retiree.
Returns on investments is mainly a market action - or reaction - and a retiree can not
control the market - only respond.
And what response will cost the retiree the least?
What response has a minimal fee?
Howie52
My retirement is mainly from social security and dividends. Largely a function of the overall
economy and carrying a fair amount of risk. But I do have the option of adjusting my spending -
not buy the beef or pork when the prices rise. Buy tinned meat rather than visit the butcher shop.
Leave the costly items on the shelf and buy what might be on sale - or dated as best for sale by
tomorrow morning.
Cutting retirement spending is something you can do when - or before - the market forces force an
action of another kind.